VIX Rallies in Options Trading Today

by Frederic Ruffy | May 23, 2011 4:31 pm

Your daily options trading[1] wrap up.

Sentiment

Stocks are broadly lower on worries about Eurozone debt problems. Trading was volatile in Europe after Standard & Poor’s lowered Italy’s credit rating to negative. In the US there has been no economic data or earnings of broad market significance. Crude oil has given up $2.50 to $97.60, but volatility in global financial markets has given gold a lift, as it trades up $7.80 to $1,516.70. The dollar index gained 1%. Meanwhile, the Dow Jones Industrial Average is down 120 points, but 60 points off session lows. The NASDAQ lost 38. Trading in the options market is on the light side, but reflects the cautious underlying tone with 6.6 million calls and 6.7 million puts traded so far.

Bullish Flow

Krispy Kreme (NYSE: KKD[2]) adds $1.63 to $8.03 after the donut shop reported a quarterly profit of 13 cents per share, which beat Street estimates by four pennies. Options on Krispy Kreme are seeing brisk trading with 10,000 calls and 1,260 puts so far. The top trades of the day appear to be a spread, in which 2,000 KKD August 7.5 Calls were sold and 2,000 KKD August 10 Calls bought, which is possibly rolling of a bullish position from in-the-money to out-of-the-money call options. Jun 7.5, Nov 7.5 and Nov 10 calls are seeing interest as well. Meanwhile, implied volatility in KKD is down about 11.5% to 55.5.

Bank of America (NYSE: BAC[3]) loses 16 cents to $11.42 and the BAC Aug 12 – 13 Call Spread is bought at 24 cents, 20,000 times. Open interest is sufficient to cover in both contracts. So, it might be closing or a roll. Or, it might be a bullish play targeting a move to $13 and beyond in BAC shares through the August expiration.

Find more option analysis and trading ideas at  Options Trading Strategies[4].

Bearish Flow

SPDR Gold Trust (NYSE: GLD[5]) adds 14 cents to $147.63 after gold gained $5.60 to $1,514.50 an ounce. In options action, a noteworthy recent trade in the ETF is the GLD Jun 140 – 145 Put Spread at $1, 20,000 times on the ISE. Sentiment data indicate half of the spread was bought-to-open and this looks like a bearish play on gold, or perhaps a short-term hedge. The spread offers a $4 payoff if shares fall to $140 or below through the Jun expiration, which represents a 5.2% drop in the price of gold over the next 25 days.

Implied Volatility Mover

CBOE Volatility Index (CBOE: VIX[6]) hit a morning high of 20.03 and its best levels in two months early Monday. Implied volatility is higher market wide as anxiety levels are elevated after S&P downgraded Italy’s credit rating to negative, adding to recent worries that the European debt crisis is still worsening. Stock benchmarks are sharply lower across the Euro-zone and volatility is spilling over onto Wall Street. VIX is now up 2.17, or 12.4%, to 19.60 and early trades in the volatility index include a1740-contract block of VIX Jul 22.5 Calls at the 2.20 ask price. 12,000 calls and 3,000 puts traded in the first ten minutes of trading. 

Options Flow

Bullish flow detected in United Therapeutics (NASDAQ: UTHR[7]), with 3759 calls trading, or two times its recent average daily call volume.

Bearish activity detected in Career Education (NASDAQ: CECO[8]), with 5160 puts trading, or eight times its recent average daily put volume.

Bearish activity detected in Waste Management (NYSE: WM[9]), with 9052 puts trading, or four times its recent average daily put volume.

Increasing volume is also being seen in EMC (NYSE: EMC[10]), AMR (NYSE: AMR[11]), and Cheniere Energy (AMEX: LNG[12]).

Frederic Ruffy is the Senior Options Strategist at Whatstrading.com[13], a site dedicated to helping traders make sense of the complex and fragmented nature of listed options trading.

Endnotes:
  1. options trading: http://investorplace.com/options-trading/
  2. KKD: http://studio-5.financialcontent.com/investplace/quote?Symbol=KKD
  3. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  4.  Options Trading Strategies: http://investorplace.com/category/options-trading/trading-strategies/
  5. GLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLD
  6. VIX: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIX
  7. UTHR: http://studio-5.financialcontent.com/investplace/quote?Symbol=UTHR
  8. CECO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CECO
  9. WM: http://studio-5.financialcontent.com/investplace/quote?Symbol=WM
  10. EMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=EMC
  11. AMR: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMR
  12. LNG: http://studio-5.financialcontent.com/investplace/quote?Symbol=LNG
  13. Whatstrading.com: http://www.whatstrading.com/

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